I. BRIEF HISTORY
Waste Management Inc is a company in North America that provides waste and environmental services. This company was founded by Larry Beck in 1894. The company's operations also involved managing air and gas, environmental and groundwater protection as well as environmental engineering. By 1971, the company became more public after the 133 acquisitions and the $82M in revenue that were made and soon became the largest waste hauler in the country. This Company offered environmental services to almost 20 million customers in America, Canada as well as Puerto Rico. Waste Management soon took the position of becoming "North America’s largest residential recycler." It was able to handle and manage more than 8.5 million tons of materials. These "materials" included plastic, metal, glass, electronics and paper at 128 different facilities Those involved in the fraud had absolute power and control over all of Waste Management Inc.’s operations including the founder, chief executive officer & chairman of the board Dean L. Buntrock, Phillip B. Rooney, president, director, chief operating officer & chief executive officer for a brief period, James E. Koenig, executive vice president and chief executive officer, Thomas C. Hau, vice president, corporate controller & chief financial officer, Herbert Getz, senior vice president general council, & secretary, and Bruce D. Tobecksen, vice president of finance (sec.gov, 2002). Together and with the help of Waste Management Inc.’s auditing partner, Arthur Andersen there was no means to stop or detect the fraud.
The 6 men had all took part and played a role in creating this financial fraud which lasted for more than 5 years. "For years, these defendants cooked the books, enriched themselves, preserved their jobs, and duped unsuspecting shareholders", said Thomas C. Newkirk who was the associate director of the SEC's Division of Enforcement. According to the complaint, the defendants had violated federal security laws by creating financial misstatements to achieve their goal in meeting "predetermined earnings targets."
The company's revenues were not increasing fast enough, so the defendants had decided to avoid depreciation expenses on their garbage trucks, assign approximate salvage values to other assets that previously had no salvage value, refrain from recording expenses for any decreases in the value of landfills, refuse to record necessary expenses to write off the costs of unsuccessful and discarded landfill development projects, improperly capitalize a variety of expenses, and increase environmental reserves to avoid irrelevant operating expenses.
As a result of the issues, the defendants' improper accounting practices were brought to corporate headquarters. They were charged with "making false and misleading statements about the company's accounting practices, financial condition, and future prospects in filings with the Commission, reports to shareholders, and press releases." They were also charged for making "accounting manipulations known as "netting" and "geography" to make reported results appear better than they actually were and avoid public scrutiny." Knowing how this had been going on for over 5 years, when the new CEO had ordered for a review of the company's accounting practices, the review had initially led to the company's financial statements during 1992 through the third quarter of 1997. After restating the financial statements, it came to the company's attention that the financial statements had misstated its pre-tax earnings by approximately $1.7 billion. This was the largest restatement in corporate history and because of this fraud; the company had lost over $6 billion in the market value of their investments. This also led to a major drop in stock price. So in the end, the defendants go charged and the company was left with the largest restatement of $6 billion. This company also...